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Wednesday, February 21, 2007

This is What Happens When You Only Read the Press Release

Over at the inaptly named Health Care Blog ("Socialized Medicine Blog" would be more accurate), Matthew Holt gives a mini-seminar on the dangers of only reading a press release and not reading the actual study on which the press release is based.

At issue is a recent study, "Self-Pay Markets In Health Care: Consumer Nirvana Or Caveat Emptor?," in the journal Health Affairs by researchers at the Center for Studying Health System Change that examined LASIK eye surgery. LASIK surgery is an ideal area for researching how well markets work in health care, since most LASIK surgery is paid for directly by the consumer and not by third-party payers like insurance companies or government programs.

Holt states: "There's been lots of BS about how the price reductions in those ads for LASIK 'prove' that cash based consumer payment works in health care." And what is that alleged bovine fecal matter regarding LASIK surgery? In a nutshell, it is inconsistent bundling of services, misleading advertising, and lack of information on quality.

However, if you dig into the study, which Holt clearly didn't, LASIK surgery performs very well on two crucial market factors: price and customer satisfaction. As market advocates have argued, when people pay for a service directly, providers compete on price, thereby driving prices down. And that is exactly what you have seen in LASIK surgery. From page w219 in the study:

In the decade that LASIK has been performed in the United States, price and volume have fluctuated; overall, the average price for conventional LASIK has declined nearly 30 percent in inflation-adjusted terms. Two factors appear to be largely responsible for this market's price-competitiveness: (1) On the provider side, a large number of providers (ophthalmologists) can enter the market relatively easily; and (2) on the consumer side, price quotes can be obtained at little cost and inconvenience.

Let me suggest that you are going to have a hard time finding any other area of our medical system where price has dropped by 30% over the last decade.

As for customer satisfaction, this is what the researchers noted on w221:

Satisfaction rates among LASIK patients are high: about 93 percent nationwide, according to one survey. Among premium-price practices, especially those emphasizing careful screening and patient preparation, satisfaction rates can reach the high 90s. Even among high-volume discounters, some of which have received negative publicity for questionable business practices and some bad outcomes, satisfaction rates range in the 80s.

Lower prices and high customer satisfaction. Looks like markets are working exactly the way they are supposed to.

But what about the other problems? First, what's notable is that the authors of the article do not quote any free-market health care advocates claiming that in a market there will be no inconsistent bundling or misleading advertising. Of course these things are going to exist! On inconsistent bundling, the press release states, "The package of services included in LASIK procedure fees varies across providers. For example, one critical factor is whether the cost of enhancement surgery is included in the fee." The "package of services... varies across providers"! Goshen To Christmas!!! You mean that when I go to buy a car, some providers are going to provide leather seats and CD players, while others will offer none, while still other will offer only one of those two? Or when I go to buy a computer, different providers will provide different levels of computer speed, different quality monitors, etc., etc.? In most markets we call that "diversity" and it is a good thing, since not everyone needs exactly the same product. Apparently it is a bad thing in health care. Why that is so the authors don't say.

As for misleading advertising, sure, it undoubtedly exists. So what? It exists in almost every market, be it cars, computers, or even essentials like food and housing. Is there any particular reason to expect that health care will be any different? And could someone please point me to the free-market advocate who ever said that misleading advertising wouldn't exist in LASIK?

As for the final criticism, that of lack of quality information, the press release states, "Even when consumers are interested in obtaining quality information, the study finds that it is not easy; those wishing to compare provider quality must gather information on success and complication rates from each LASIK surgeon's practice." The study goes further, complaining that there is "No centralized source" for consumer information on doctors who perform LASIK, and that most LASIK consumers choose their surgeon on the basis of "word of mouth."

Who ever said that a centralized source on LASIK quality would exist? There are plenty of services that have no centralized source on quality. Try hiring a gardener, landscaper, or real estate agent if you don't believe me. Nor is "word of mouth" undesirable. Indeed, it is an excellent information shortcut, reducing costs such as time and money. If you have a friend who had LASIK, is there a better way to determine the quality of the doctor than by asking that friend about his experience? Maybe I'm way off base here, but I'll bet that word of mouth - i.e., relying on friends and family for advice on purchasing services and products - is a very widespread practice and a pretty effective one, too.

Columnist Mike Adams recently made the excellent point that the political left "always manage to win the argument as long as they are arguing against something we aren't saying." That seems to be the case with the way the authors of this article treated advocates for more markets in health care.

And that seems to fit Matthew Holt's agenda just fine, as long as he doesn't read beyond the press release.